The weather last week in Ontario was like a sick April Fool’s prank. Just when we thought we’d perhaps have some gorgeous weather, no. We’re settled back into a horrible cold that chills to the bone. All while trying to put enough cash aside so that we can finish off our taxes, and move on.
But move on to what?
This year has already been hard financially, and it’s likely only going to get harder. Economists continue to predict that Canadians will see a mild recession by summer. While this could mean we don’t see the 40% drop in the market as we did during the Great Recession, it’s a sting already on top of a bruise and a gash from the year before.
So to prepare, it’s a great time to move on to some monthly passive income. And there are two ways to go about that for $1,000 per month.
First, the stock
There are numerous stocks out there that provide passive income. But when you want passive income on a monthly basis, and what’s more from a strong company, the list gets shorter. Even so, there are certainly some to consider on the TSX today.
A top choice might be First National Financial (TSX: FN), which currently provides a monthly dividend at 6.42%. The $2.2-billion company is in the mortgage business, which hasn’t been doing so well during this period of high interest rates. Yet, that means it offers value for investors today.
First National trades at just 11.5 times earnings as of writing, with shares down 7.5% in the last year. Yet, in the last decade, shares are up 107%! And at a fairly steady pace, too. So with a high dividend yield on a monthly basis, this is certainly one to consider on the TSX today.
Option 1: Invest for $1,000 per month today
If you want $1,000 per month, every month, starting right now, it’s going to cost you. That’s the case no matter what you invest in. Yet, if this is something you can afford, by all means!
The only point I want to make is that you should discuss such a choice with your financial advisor. They will help you create a diverse, conservative, long-term portfolio that will see your portfolio rise steadily over time.
Still, if you have the cash set aside for riskier investments, then this could be the way to go. Here is how much it would take to create $1,000 per month today with First National stock.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL PORTFOLIO |
| FN | $37.25 | 5,000 | $2.40 | $12,000 | monthly | $186,250 |
As you can see, it would cost you a pretty penny at $186,250 to gain $12,000 per year, or $1,000 per month right now.
Option 2: Have a touch of patience
There is still another way to create $1,000 per month – you simply have to have a bit more patience. You can eventually reach $1,000 per month, or $12,000 per year, from First National stock by looking at its historical performance.
Shares are up 107%, which is a compound annual growth rate (CAGR) of 7.5% in the last decade. Its dividend is up 71%, posting a CAGR of 5.5% during that time. So, let’s say you have $37,250 to put into 1,000 shares today. You then go ahead and add $4,000 each year.
| Year | Shares Owned | Annual Dividend Per Share | Annual Dividend | After DRIP Value | Annual Contribution | Year End Shares Owned | Year End Stock Price | New Balance |
|---|---|---|---|---|---|---|---|---|
| 1 | 1000.00 | C$2.39 | C$2,391.45 | C$39,713.09 | C$4,000.00 | 1161.45 | C$40.03 | C$46,495.66 |
| 2 | 1161.45 | C$2.52 | C$2,925.86 | C$49,507.40 | C$4,000.00 | 1324.42 | C$43.02 | C$56,980.63 |
| 3 | 1324.42 | C$2.65 | C$3,514.59 | C$60,596.30 | C$4,000.00 | 1489.13 | C$46.24 | C$68,852.75 |
| 4 | 1489.13 | C$2.80 | C$4,162.69 | C$73,132.75 | C$4,000.00 | 1655.76 | C$49.69 | C$82,276.05 |
| 5 | 1655.76 | C$2.94 | C$4,875.65 | C$87,286.33 | C$4,000.00 | 1824.49 | C$53.40 | C$97,432.36 |
| 6 | 1824.49 | C$3.10 | C$5,659.38 | C$103,244.86 | C$4,000.00 | 1995.46 | C$57.39 | C$114,523.05 |
| 7 | 1995.46 | C$3.27 | C$6,520.25 | C$121,216.17 | C$4,000.00 | 2168.83 | C$61.68 | C$133,771.04 |
| 8 | 2168.83 | C$3.44 | C$7,465.17 | C$141,430.14 | C$4,000.00 | 2344.72 | C$66.29 | C$155,422.84 |
| 9 | 2344.72 | C$3.63 | C$8,501.56 | C$164,140.80 | C$4,000.00 | 2523.25 | C$71.24 | C$179,750.89 |
| 10 | 2523.25 | C$3.82 | C$9,637.42 | C$189,628.70 | C$4,000.00 | 2704.51 | C$76.56 | C$207,056.09 |
| 11 | 2704.51 | C$4.02 | C$10,881.37 | C$218,203.42 | C$4,000.00 | 2888.61 | C$82.28 | C$237,670.51 |
It would take just 11 years to reach over $12,000 in annual passive income, $1,000 per month, from dividend reinvestment!
